Churches exempt from filing fee, annual reporting

FFRF sues IRS over preferential treatment of churches

December 28, 2012

The Freedom From Religion Foundation filed a federal lawsuit yesterday challenging the Internal Revenue Service’s preferential treatment of churches in applying for and maintaining tax-exempt status. The IRS exempts churches and certain other religious organizations from paying expensive application fees and filing the onerous annual Form 990 required of non-church non-profits. FFRF and Triangle FFRF v. the IRS [view lawsuit here] was filed in U.S. District Court, Western District of Wisconsin.

FFRF, a national state/church watchdog with more than 19,000 nonreligious members, and its chapter, the Triangle Freethought Society (Triangle FFRF, N.C.), are challenging the preferential application and reporting exemptions given to churches.

FFRF and its chapter are tax-exempt 501(c)(3) nonprofit organizations that paid fees of several hundred dollars in order to apply for tax-exemption, and must annually file the annual Form 990.

The IRS requires non-church tax-exempt non-profits to file “detailed, intrusive, and expensive annual reports to maintain tax-exempt status, but such reports are not required for churches and certain other affiliated religious organizations,” the complaint notes.

“Why should churches be exempt from basic financial reporting requirements? Equally important, why would churches not wish to be accountable?” asks Annie Laurie Gaylor, FFRF co-president. “Having tax-exempt status is a great privilege, and in exchange for that privilege, all other groups must file a detailed report annually to the IRS and the public on how we spend donations.”

“The unfairness of this is so overwhelming,” says FFRF President Emerita Anne Nicol Gaylor. “Churches are allowed to play by different rules.”

The Form 990 requires detailed reports on revenue and functional expenses, activities, governance, management, how groups fulfill their mission, and what proportion is spent on programs, management and fundraising.

The “preferential treatment of churches” directly benefits churches, while discriminating against other non-profit organizations, including the plaintiffs, “solely on the basis of religious criteria,” FFRF’s complaint asserts. This “results in obligations imposed on secular non-profits, including the plaintiffs, that are not imposed on churches.”

FFRF asks the court find the church exemptions a violation of the Establishment Clause of the First Amendment, and the equal protection rights of the due process clause of the Fifth Amendment to the U.S. Constitution. FFRF seeks to enjoin the IRS from continuing to exempt churches and related organizations from the application and annual reporting required of all other non-profit organizations under §501(c)(3).

This is FFRF’s third ongoing lawsuit against IRS practices involving preferential treatment of churches.

In November, FFRF filed a high-profile lawsuit seeking to enforce the IRS’ non-electioneering code against churches. In late August, U.S. District Judge Barbara Crabb ruled that FFRF and three of its directors have standing to proceed in a challenge of the 1954 “parish exemption” act of Congress. That law, enacted to reward ministers for fighting what the law’s author, U.S. Rep. Peter Mack, called “a godless and antireligious world movement,” permits “ministers of the gospel” to deduct payment designated as a housing allowance from taxable income.

All three lawsuits were filed in U.S. District Court, Western District of Wisconsin, and were brought on behalf of FFRF by attorney Richard L. Bolton.

The Freedom From Religion Foundation, based in Madison, Wis., a 501(c)(3) nonprofit educational charity, is the nation's largest association of freethinkers (atheists, agnostics), and has been working since 1978 to keep religion and government separate.